Real Money

Wet Seal Prospects Dim

A big decline in same-store sales puts the retailer's turnaround in jeopardy.

A big drop in same-store sales at Wet Seal ( WTSLA) and news that it is expecting its seventh consecutive quarterly loss are casting doubt on the retailer's supposed turnaround plan.

The stock was trounced in Monday trading, closing at a 52-week low.

"This is a company that's really having a huge number of problems," said Craig Johnson, president of Customer Growth Partners, a retail consulting firm. "The sectors of the market where people are fickle with their taste ... if you aren't spot-on with what your customers want, you're like yesterday's newspaper."

The company's series of fashion misses, which have led to poor operating results for the past two years, are old news. So while most retailers were up against easy comparisons for March same-store sales, Wet Seal should have had it easier.

But the teen retailer missed analysts' expectations once again, reporting Thursday that same-store sales fell 21.1%, compared with First Call's estimate for an 11% decline. The company said transactions at its Wet Seal division were weak, "impacted by significantly lower clearance sales compared with the prior year."

Double-digit drops in same-store sales results are lately a constant at Wet Seal; it has reported double-digit declines in 13 of the last 16 months.

Wet Seal shares closed down 91 cents, or 11.5%, to $7 on Monday.

In November, TheStreet.com reported that a turnaround could be in the works at Wet Seal, but after four more months of negative same-store sales, analysts are concerned. Katharine Rice Galligan of the research firm Aperion Group, doesn't think a turnaround by back-to-school season is feasible, as the company and other analysts have projected.

"They're just buying too much of the same stuff," said Galligan.

Galligan thinks the company's biggest issue has been pinning down its core consumer. "They don't know who their target customer is. They keep redefining who that person is going to be, and they keep missing it," she said.